In the report titled, “The Future of Distributed Renewable Energy in India” published by the Climate Policy Initiative in May 2021, the benefits and market potential of India’s DRE sector are outlined, the current policy and institutional landscape is examined, and recommendations are provided for different stakeholders. REGlobal provides an extract of the report related to financing of DRE projects in India.
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During the investment segment of the Leaders Summit on Climate last week, President Biden announced the U.S.’s international climate finance plan. The plan outlines how the US will scale-up international climate finance, with some top-level indications of how much they are aiming to provide over President Biden’s first term. These are smart investments for America that will spur clean energy opportunities around the world, reduce the costs of disasters, and help avoid conflicts.
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The momentum towards greening the economy implies transition risks that represent new threats to financial stability. The risk of a run on brown assets, similar to that seen during the subprime crisis, can have widespread destabilising effects.
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Both domestic and foreign investors point to a slightly more favourable outlook for state versus federal policy, APAC-based investors in particular (96%). European investors are the notable exception with 66% expecting state policies to be supportive versus 81% for federal policies. Australia-based investors are marginally less positive about government support than they were in the previous survey with 91% anticipating supportive policies from state government and 85% from federal government, versus 90% overall (federal and state) in the 2019 study.
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The Japanese green bond market continues to see strong momentum, growing by a third in 2020. Political developments will give further impetus. Japan’s commitment to net-zero emissions by 2050 represents a key milestone for the country, which is stepping up efforts on multiple fronts
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Access to low cost funding for solar projects is a critical requirement to accelerate the uptake of solar power in Africa. A clear and healthy growth trajectory is only possible with a supportive framework and sufficient funding flows. While regulatory improvements are taking place, albeit at a slower pace, a crucial area to address for the growth of the solar segment in Africa is financing. At REGlobal’s recent virtual conference on “Solar Power in Africa” industry experts presented their vies on solar investments and emerging sources of financing for Africa.
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China accounts for nearly a third of the global total. Based on its current trajectory, China’s emissions are expected to increase further by 7%-15% by 2030 above 2015 levels, which would more than offset the global decreasing trend. To ensure that China meets its own goals for advancing an ecological society, as well as its stated commitments to the Paris Agreement, climate and green finance needs to mobilize at an unprecedented scale.
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A new, broad measure of ‘energy transition investment’, compiled by BloombergNEF (BNEF), shows that the world committed a record $501.3 billion to decarbonization in 2020, beating the previous year by 9% despite the economic disruption caused by the Covid-19 pandemic.
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Following a tough first half when corporate funding was down 25% year-over-year, recovery has been swift and broad, with corporate funding up 24% for the year. The solar ETF was up 225%, with 15 solar stocks up over 100% in 2020. Public market funding was also up with the help of several IPOs, and debt financing was up on the back of securitization deals.
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Debt-for-climate swaps have become a movement within development finance over the past few months. Several exhort action in these current fiscally constrained times to help with debt relief and to promote a green recovery. There are also proposals for addressing the climate and health nexus. Others advise caution before jumping into doing one of these transactions, arguing that such a swap may not be the most efficient way of achieving mutually desired goals.
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Green bonds have played an important role in developing the market for sustainable finance instruments. Its rapid growth is a testament to investors’ demand for such instruments, which is likely to grow further. Complementary ratings to current green certifications could help to convert market trends into much needed reductions in carbon emissions.
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The Philippines has been one of the fastest growing economies in the Association of Southeast Asian Nations (ASEAN) and despite the covid-19 crisis, the economic growth is expected to rebound gradually in 2021–2022. However, this recovery from the COVID-19 crisis would need urgent focus on green infrastructure and creating an enabling environment for these investments. The Green Infrastructure Investment Opportunities: Philippines 2020 Report has been prepared by the Climate Bonds Initiative (CBI).
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KEPCO and other companies that have decided to pursue a greener business model should be working hard to demonstrate to the market that they are taking the right steps to align with ESG investors. At this stage, however, it is unclear whether KEPCO has the appetite to seriously transition into a world-class renewable power company and catch up to its ambitions.
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JPMorgan Chase announced in October that it would shape its financing portfolio in three key sectors to align with the Paris Agreement; three days later, HSBC announced its statement of net-zero ambition. This past year has seen a slew of similar statements, including from Barclays in May—making it one of the first banks to announce ambition to go net zero by 2050—and then from Morgan Stanley in September.
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Investors representing more than $45 trillion in assets under management have already agreed to drive climate change action across their portfolios. Sustainable finance has, therefore, become an integral part of how many financial services firms operate.
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The experiences of Jordan and Rwanda show that there are different ways to address this challenge. In retaining the fund model, Jordan seeks to innovate within its constraints, while Rwanda is creating a new institution to expand the financial instruments available to it.
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Countries such as Indonesia, Malaysia and the Philippines all fit into this category, with Vietnam potentially offering the greatest immediate opportunities. The OECD forecasts Vietnam’s economy will grow 6.5 per cent over the next five years.
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IEEFA has tracked 50 significant global financial institutions to date that have announced oil and gas investment restrictions, specifically on oil sands exploration and/or Arctic drilling. While 39 have declared a formal policy against oil sands and 37 on Arctic drilling, 26 financial institutions have restricted both. Most are an extension of existing policies restricting thermal coal power and coal mining lending.
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Southeast Asia requires an estimated $3.1 trillion or $210 billion annually from 2016 to 2030 for climate change-adjusted infrastructure investments. However, with a financing gap estimated at $102 billion per year for selected Southeast Asian countries from 2016 to 2020, the need for private sector financing to fill the gap was already critical even before the pandemic.
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With energy having been identified as an enabler of the socio-economic pillar of Kenya’s Vision 2030, the country has set an ambitious target of achieving 100% renewable energy by 2030 and seeks to deliver universal access to electricity for households and businesses by 2022. To achieve these targets, investment of $2.75 billion is required, with an additional $58 million every year after 2022.
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